Denver Family Practice

For Sale.
Solo
Family medicine practice located in the Denver metro area. This busy practice is
in a modern professional office building and has 4 exam rooms, 1 treatment
rooms, 2 consultation rooms, lab area, nurse’s station, ample parking, and easy
street access. Practice has an excellent payer mix. The practice is on track for
about $840K gross collections in 2018 with the doctor seeing patients about 33
hours per week and about 80 patient encounters per week. The owner doctor
projected 2018 take home income is about $410K.

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Medical Practice Brokers is growing and expanding our presence throughout the
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Designed exclusively for Medical Practice Owners, this seminar shows you what it takes to sell your practice for the best price.

Medical Practice Valuations

MPB offers a variety of valuation reports and services, including litigation
support & expert witness testimony for divorce,
oppressed shareholder, partnership dispute, and other legal matters. For information on
our appraisal services click on the link(s) below:

Why are Practices Valued?

Practice valuations are performed for a variety of reasons, including the
following:

purchase/sale

partner buy-in or buy-out

divorce

merger with another practice

partner/stockholder disputes

retirement planning

tax purposes

bankruptcy

eminent domain actions

etc.

What's the Difference between a Valuation and an Appraisal?

The terms valuation and appraisal are used interchangeably. Both refer
to determining the value of a business or practice. In recent years the
term ''valuation ' has become more popular. However, using 'appraisal' is
equally acceptable. The term 'evaluation' is however an incorrect use of
the term, and is often confused with the correct terms (i.e., valuation or
appraisal). A trained valuation professional would never use the term
'evaluation', and is usually an indicator of lack of formal valuation education.

What do Practices Sell For?

There is no single magic formula to value any business. And
professional practices are generally more difficult to value than most
businesses as they tend to have a wider range of values. Though people
frequently ask for a rule-of-thumb, even knowing they are imprecise and may not
apply to your situation. Here are a couple rules-of-thumb:

Most practices will sell for between 1x to 4x annual
net earnings.

Most practices will sell for between 20% to 80% of annual
gross income.

The problem with rules-of-thumb is, "How do you know if your practice is
the norm or the rule-of-thumb may not apply to you. Also, different
practice types have significantly different average price ranges. The
average practice range/ratio is significantly different for a primary care
medical practice when compared to a medical specialty practice, or a general
dentistry practice, or an optometry practice. Even within a particular
practice type, we often see practices sell for &plusmn; 2 standard
deviations above or below the average sales price. This means that a
practice that might have an average sales price of 30% of annual gross
income might have a common price range of 10% to 50% of annual gross income.
Further, there can be outliers even above/below this range. Will your
practice sell above or below the average?

Why is the Price Range so Wide?

There are dozens of factors that influence practice value. A key factor
is practice type. Average pratice price ratios vary greatly between
practice types: medical, dental, chiropractic, optometry, or even between a
family practice and a cardiology practice. Beyond practice type, numerous
factors influence value. Some sample factors are shown below:

Profitability. A practice netting 35% of gross will sell for
less than a practice netting 50% of gross. How do you compare with
your industry standard?

Location. Practice in rural or particularly high cost of
living areas may sell for less.

Facility. Practices located in larger, modern facilities tend
to sell for more than practices located in cramped, run down facilities,
on the bad side of town.

Equipment. Practices with lots of new, expensive, modern
equipment tend to sell for more than practices with old equipment or
very little equipment. Have you implemented an EMR system yet?

Hours worked. Are you working 20 hours per week or 50 hours
per week to generate $XXX,000 of revenue.

Reimbursement projections. How is fee reimbursement trending
for your specialty? What is your procedure mix?

Technology advances. Have recent technological advances made
your equipment or procedures performed obsolete?

Staff. Do you have well-trained staff with good tenure, or poorly
trained staff with high turnover?

Payer Mix. Is yours an all cash practice, or all Medicaid, or
a blend of traditional insurance and PPO, or captitation?

Financial History. Is your practice income increasing or decreasing?
Is the current growth rate sustainable?

Referral Base. Is your referral base broad and deep? How well
will new patient referrals transfer to a new buyer?

Personal Goodwill. How much of the practice revenue is tied to
the doctor's individual reputation or personality? Will
patients/referrals accept another doctor?

Sale Terms. Will it be a stock sale or an asset sale? What is
included or excluded from the sale?

Financing. What type of financing is available? Commercial
loan or seller carry? How much down payment? Interest rates?

Competition. Did a competitor just open down the street? Are
you the only game in town? Is the hospital competing with you?

At Medical Practice Brokers, LLC we consider over 40 different factors
when valuing your practice.

Who does Valuations?

There are several categories of people that perform valuations:

business appraisers

accountants (CPAs)

business brokers

college professors

commercial real estate appraisers

investment bankers

Each category has it advantages and disadvantages. Although, the better
appraisers tend to be educated in business valuation and also have an
understanding of the various issues involved in valuing a business for the
stated purpose (e.g., buy/sell, divorce)

Why not just have my CPA do it?

Accountants often do not have significant experience or training in
performing valuations. The vast majority of CPA's nationwide have little
or no training or expertise in business valuation. While they are very
familiar with financial statements, many are uncomfortable making the forecasts
that crucial to valuation. Further, their experience tends to be in the
tax value, which is usually quite different than Fair Market Value or Fair Value
is in divorce. They usually do not have real world sales experience to
understand how terms of sale, or loan requirements, or current buyer trends will
alter practice value.

How about a general business broker?

General business brokers most often use generic rules-of-thumb to list and
sell businesses. However, rules-of-thum can be dangerous as they do not
take into consideration the specifics of a particular situation. Also,
many business brokers lack the formal valuation education and have limited
understanding of business financials. Finally, most general business
brokers are not familia with professional healthcare practices and have
difficulty assessing the variations unique to professiona practices. Most
business brokers will just tell you that a practice will sell for X times net or
gross--this usually will give you a dramatically wrong answer to practice value.

How about those Valuation Software Programs?

Low-end software-driven products should be approached with caution. In
general, valuation programs are designed to give quick, and not necessarily
accurate answers. Futher, by design, they deny the user the expertise of a
qualified appraiser's many years of valuation wisdom. While valuation
software tools can be an effective time saver in the hands of a trained
professional, their use is problematic when used by individuals or untrained
part-time appraisers who do not understand the appraisal process or the tool
itself. The old axiom of 'Garbage In - Garbage Out' often describes the
result. You may find it interesting to know that most certified business
appraisers rarely use purchased valuation software as the crucial element in
valuation is the experienced interpretation of information.

Valuation Organizations

There are four organizations in the United States that certify business
appraisers:

Institute of Business Appraisers, Inc. (IBA)

American Society of Appraisers (ASA)

National Association of Certified Valuation Analysts (NACVA)

American Institute of Certified Public Accountants (AICPA)

The below table compares/contrasts the certification credentials for each
of these organizations. For better quality appraisals, on finds that
appraisers hold the more difficult to obtain certifications (i.e., Certified
Business Appraiser (CBA) from the Institute of Business Appraisers or the
Accredited Senior Appraiser (ASA) in business valuation form the American
Society of Appraisers) generally do high quality work and are well regarded
in court.

A Comparison of Business Valuation Certifications

Requirement

IBACBA

ASA

ASA/AM

NACVACVA

AICPAABV

Education

College/Equivalent

College/Equivalent

College/Equivalent

College/Equivalent

Continuing Professional Education

Yes, 24 Credits every two years or equivalent

Yes, 100 Credits every five years

Must maintain CPA credential. Other classes in business
valuation are required to maintain designation.

60 Credits and involvement in 5 reports every 3 years

Report Review Requirement

Yes, 2 Reports rigorously reviewed by leading Business
Appraisers

Yes, 2 Reports rigorously reviewed by leading Business
Appraisers

None other than portion of qualifying exam.

None

Experience

Minimum of two assignments--two peer reviewed reports

5 Years for ASA; 2 years for AM

No Minimum

Involved in 10 Business Valuations

Qualifying Exam

Proctored, Closed Book

Proctored, Closed Book. Also must pass an Ethics Exam.
A USPAP exam must be passed every five years

Take-Home, Open Book until 1999; Proctored, Closed Book
starting in 1999. Exam includes a report writing portion.

Proctored, Closed Book

Organization has Professional Standards

Yes, for over ten years

Yes, for over ten years

Yes, since 1995

Under Consideration

Our People

Seveal MPB Brokers and affiliates are members of, and/or are accredited by
professional valuation organizations listed above. Additionally, our
experience in practice sales/brokerage gives us a rare perspective as to true
practice fair market values. All of our brokers have access to our
internal network of sales and valuation expertise. Our team also includes
an appraiser credentialed by the Certified Machinery and Equipment Appraisers
(CMEA).

Types of Practice Appraisal Reports and Services

MPB offers a variety of practice valuation services. For more information click
on the appropriate link below: